New Report: Eliminate The Hidden Inflation Tax 

Why New York State should index taxes to inflation 

NEW YORK, NY—  New York ranks 50th on the Tax Foundation’s Individual Income Tax Index and has seen record levels of outward migration in recent years, in part because New York taxpayers are saddled with hidden, compounding tax burdens. 

In a new report, Manhattan Institute’s Paul Dreyer, Victoria Freeman, and Matias Ahrensdorf evaluate the consequences of non-indexation in New York. Their analysis reveals that stagnant income thresholds and deductions lead to higher effective tax rates and reduce purchasing power for New Yorkers, especially for low- and middle-income earners. This, in turn, intensifies outward migration, resulting in both a loss of tax revenue and economic activity. 

The authors argue that comprehensively indexing all income tax brackets and deductions to regional Consumer Price Indexes (CPIs) is both politically viable and fiscally responsible. With a $2.2 billion budget surplus in 2025 and a history of bipartisan support for indexing reforms, New York is well-positioned to lead on tax modernization and could stem the tide of outward migration to lower-tax states.   

The report calls on lawmakers to restore tax fairness, fiscal integrity, and democratic accountability by reintroducing tax indexation. Doing so would reduce regressive tax impacts, help prevent taxpayer flight, and ensure that the state’s tax system accurately reflects the real value of money relative to the state of the economy.  

Click here to read the full report.